Visibility & Control

Webster's definitions:

Monitor: To check for information and significance; to
check for quality

Control: To govern, regulate, test or verify; to exercise
power over

In the LML context, monitor & control generally means maintaining
inventory visibility and having procedures in place to use the
information derived from that visibility to one's competitive advantage.
It also means having the right tools to enable automation,
collaboration, standardization of the process.

Visibility

The word "visibility" is ubiquitous in today's supply chain discussions
and literature. The recent buzz over RFID technology is, in a large
part, about visibility. Before that it was barcodes. But what does it
mean to have visibility? What are enterprises watching so closely?
What is gained through enhanced or even total visibility?

While convenient and valuable, it is no longer enough just to track
small packages or airfreight in transit. From JIT in the 1980s through
lean and postponed manufacturing today, evolving supply chain strategies
have put an ever increasing premium on visibility of ALL goods -- both
in transit and at rest. By employing ERP and warehouse management
systems (WMS), supported by barcode and RFID technology, most
enterprises have gained a firm grip on inventory within their own four
walls, as well as the costs associated with that inventory.

The same cannot be said for goods coming inbound from suppliers. Most
companies still rely on their order dates and standard lead times to
estimate when goods will arrive. For critical shipments, personnel may
get involved via email, phone and fax to get more timely and accurate
information. But this is costly and labor intensive because every
critical shipment must be bird-dogged, rather than just those that are
in jeopardy.

End-to-End / Granular Visibility

The demand for visibility has also moved beyond just the shipment period
to include the entire cycle from order generation through to final
disposition of the goods -- e.g. sale, consumption or manufacturing --
and invoice payment. Enterprises want that visibility down to the most
granular level possible -- order, sku/part, style, size, lot, serial #,
Julian Date, and the list goes on.

For example, a major clothing retailer in NYC may be running a promotion
for new winter jackets targeted to hit the racks on a specific date.
The nature of fashion is such that, if the target date is missed, the
clothing will lose significant market value almost immediately. Final
assembly and labeling are done in the USA, but ten varieties of shells
are made in Indonesia and ten different linings in Bangladesh. Based on
standard lead times, the retailer places orders with both suppliers in
hopes that the goods arrive at the same time for final assembly and
placement on the target date. But in order to have maximum control over
hitting the target, the retailer must have visibility of the order at
the style and size level as soon as it is placed with her Asian
suppliers. She cannot wait until the shipment is supposed to sail or
fly to learn that there has been a production problem for a particular
size/style. By then it is probably too late to enact contingency plans
and make the promotion. Once the goods are in transit, the retailer
will track them all the way into the country, through Customs and into
her facility, intervening wherever necessary to maintain the schedule --
Which leads us to Control.

Management, Control and Tools

An axiom of quality engineering says that, in order to control
something, one must first be able to measure it. Armed with the scope
and depth of information achieved above, supply chain professionals have
what they need to manage processes and control costs in the LML.

In the fashion scenario, the retailer would establish a process -- very
likely in collaboration with an overseas agent -- to obtain statuses at
critical manufacturing milestones. If a milestone is missed, then
contingency plans can kick in, e.g. adjust the promotion date or source
elsewhere. But this is a lot of legwork if done with phone, fax and
email. Fortunately, the retailer can employ a state of the art purchase
order management tool that enables collaborative status updates and
sharing around the globe via the web. So that she can manage by
exception, the system has event driven triggers to automatically alert
her when a particular size/style misses a milestone anywhere in the
supply chain -- from initial order date to final receipt of the goods.

Assuming that the goods arrive in the country according to schedule,
there are still opportunities to miss the target date and run up
considerable costs in the process. They must still clear Customs, pass
any exams, move inland, be scheduled, picked up and delivered. In this
era of vanishing free days and escalating demurrage rates, the return of
empty equipment to the carrier must also be closely managed.

This process of moving goods from arrival port/airport to door is
referred to as "last leg management." Companies with excellent last leg
management enjoy competitive advantage in the form of lower demurrage
costs, lower dock labor costs, higher product availability, less
inventory and better cash to cash cycle. Last leg management is even
more hands on and collaborative than PO management. It absolutely
requires an Internet native tool to track and update goods flow through
the various stages of the process and make that information available to
authorized stakeholders. Event driven alerts warn of missing documents,
Customs and FDA inspections, missed pick-ups, hot shipments as defined
by the consignee, and limitless other statuses.

The net result is that goods arrive according to priority, on schedule,
without penalties, at a rate that is optimal for the receiving site.

Conclusion

PO management and last leg management are just two areas of opportunity
made possible by total end to end supply chain visibility. Others
include optimization, invoice auditing, quality assurance and postponed
manufacturing. Optimization was discussed earlier in this series.
Auditing and quality assurance will be covered in the last two
installments over the next month. Postponed manufacturing is a subject
for a future article.

The bottom line from a macro and practical perspective is that
enterprises are working diligently to drive cost out of their supply
chains. One would be hard pressed to find a success case that did not
employ improved information -- timelier, more accurate, more
comprehensive and more granular -- about the goods in the supply chain,
as well as the entities and processes that control them.

Some key questions to ponder:

Where are the blind spots in my supply chain?

What are they costing me?

What is my information strategy to eliminate them?

What technology will best meet my needs and give me competitive
advantage?